UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 15219 / January 17, 1997
Securities and Exchange Commission v. I-Net Providers, et al.,
Case No. 96-2206-CIV-23(E) (USDC/MD FL)
The Securities and Exchange Commission ("SEC") announced
that on October 30, 1996, the United States District Court for
the Middle District of Florida entered multiple emergency Orders
to halt a $16.5 million boiler-room operation conducting business
throughout Florida and in Las Vegas, Nevada. The SEC alleges
that at the time of the Court's Orders, the boiler-room operation
was in the process of soliciting investors nationwide in a
fraudulent telecommunications securities offering; the fourth
such offering conducted by this boiler-room operation since June
1995.
The SEC, in a coordinated effort with the Federal Bureau of
Investigation, U.S. Marshal's Service, and Florida Attorney
General's Office, immediately secured the seven known offices
from which the defendants were conducting their operation. This
included offices in Tampa, Clearwater, Boca Raton, Maitland, Fort
Myers and Las Vegas. The defendants and their employees were
evicted from each location, the locks changed, and a Court-
appointed Receiver is now in possession of each office and all
company records. At the same time, the SEC froze all of the
defendants' known bank accounts. Thus far, more than $1.5
million in investor funds has been frozen.
According to the SEC's complaint, two Florida-based
companies, Twenty-First Century Connection, Inc. ("Twenty-First
Century") and Capital Link Holding, Inc. ("Capital Link"),
operate the boiler-rooms. The complaint alleges that these two
companies are run by Robert H. Shields ("Shields"), of Irving,
Texas, and Gary Mariarossi ("Mariarossi"), of Altamonte Springs,
Florida. The complaint further alleges that Shields is a repeat
securities violator; he was previously found by a Texas court to
have engaged in fraudulent practices in connection with the sale
of unregistered securities.
When the SEC and its task force arrived at the numerous
boiler-room offices, approximately 200 employees were in the
process of soliciting investors in a securities offering known as
I-Net Providers ("I-Net"). According to the SEC's complaint, I-
Net purports to be an Internet service provider poised to enter
the on-line market in Atlanta, Houston, and Philadelphia through
a joint venture with a supposedly successful Internet service
provider in Phoenix. The SEC's complaint alleges that, in fact,
the purported joint venture partner is merely a shell company
with no assets and which operates out of a one-room office, and
that the individual represented as the president of the joint
venture partner, and touted as an expert in the
telecommunications field, resigned prior to the start of the I-
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Net offering. In addition, according to the complaint, I-Net's
offering materials contain baseless financial projections
predicated on the unfounded joint venture. The SEC alleges that
since June 1996, Twenty-First Century and Capital Link Holding
have raised more than $4 million in the I-Net offering from over
200 investors nationwide.
The SEC's complaint additionally alleges that the prior
three offerings marketed by Twenty-First Century and Capital Link
Holding, in which at least $12.5 million was raised from hundreds
of investors, were outright frauds. According to the complaint,
in the first three offerings, investors, contrary to what they
had been promised, have received no interest in an established
telecommunications business and most of their funds are believed
to have been misappropriated.
Among the Orders entered by the Court to shut down this
fraudulent operation are: (1) a Temporary Restraining Order to
halt the securities sales and freeze the defendants' assets and
(2) an Order appointing a Receiver to immediately secure the
offices and assets of the corporate defendants. The SEC is also
seeking in this lawsuit preliminary and permanent injunctions
from future violations of Sections 5(a), 5(c) and 17(a) of the
Securities Act of 1933 ("Securities Act"), and Sections 10(b) and
15(a) of the Securities Exchange Act of 1934 ("Exchange Act") and
Rule 10b-5 thereunder, disgorgement of ill-gotten profits and
money penalties.
The defendants in the lawsuit are: Twenty-First Century,
Capital Link Holding, Shields, Mariarossi, Marketing Concepts
Group, Inc., I-Net, I-Net Holdings, Inc. and Michael Coyne (the
president of I-Net Holdings).
Also included in the lawsuit as relief defendants are four
business entities to whom the SEC has traced some $7 million in
investor funds. These entities are: Apex Marketing, Inc.,
Capital Link, Inc., Frontline Consulting, Inc. d/b/a Midland &
Associates, and Twenty-First Century Connection, LP.
The Office of Florida Attorney General Bob Butterworth
played a significant role in the expedited investigation of this
matter. The SEC was also assisted by the Securities Division of
the Arizona Corporation Commission.